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Malaysia Zero per cent GST from June 2018

So Malaysia’s Finance Ministry has confirmed on 16 May that they will reduce their Goods and Services Tax (GST) from 6 per cent to ZERO per cent from 1 June 2018.

Wah no GST?! Zun bo?

Malaysia’s finance ministry said in their statement that “All registered traders must follow the decision of the zero rate now. At the same time, registered businesses are still subjected to all current regulations”. The GST removal is applicable nation-wide in Malaysia until further notice.

Swee la, the Pakatan Harapan (PH) coalition is fulfilling their promise of abolishing the GST, one made by the newly appointed Prime Minister Mahathir Mohamad during the recent general election. The 6 per cent GST was previously introduced by ex-Prime Minister Najib Razak in 2015.

But is this really as rosy as it seems? Well, the new Malaysian gahmen then said it will bring back the Sales and Services Tax (SST) to replace the new GST.

Kelong la…like draining old wine into a new bottle leh, same thing with a different packaging. While removing GST will no doubt encourage spending and allow some grip on inflation, it sure will have some kind of rippling effect on any economy one.

Especially since this will create a sudden gap in the country’s revenue. How to plug in this gap? Would it mean heavier reliance on other revenue sources and making gahmen budget more volatile to other revenue fluctuations? It’s not as simple as it seems.

The finance ministry also said that the shortfall in revenue will be supported by specific revenue and expenditure measures, this includes the reintroduction of the SST, which also means that the policy is not entirely scrapped. Find out more here.

ee, don’t be taken in so easily.

No doubt that such extreme proposal would resonate with many people. But before we are quick to allow ourselves to be swayed by populist measures, let’s think deeper and scrutinise if it really makes sense.